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Network Virtualization – Not Your Father’s Business Model | Part 1

Joint emergence of network functions virtualization & software-defined networking amounts to a significant technological change

As technology evolves, business models evolve. The corner grocery store gave way to the emporium, which became the supermarket. Now we order groceries online with a credit card, and a truck turns up with the goods. Hansom cabriolets became taxis and limos, and now we have Uber. At one time, people would communicate at a distance through pigeons and human messengers. Then we created postal services, then email, and now a plethora of social networks. We still eat food, move around and communicate, but we do it all in different contexts. None of this contextual change would be economically or technically possible without the information systems to manage the business relationships, track transactions and settle accounts.

Now, think about your phone and Internet access arrangements. For most people, this means a subscription with one big company, a contractual commitment, a monthly payment and perhaps some usage charges. Big companies build and own the infrastructure; they may subcontract work to other companies, but the carrier "owns" the customer relationships. It was pretty much like that 50 years ago.

The joint emergence of network functions virtualization (NFV) and software-defined networking amounts to a significant technological change - actually, a revolution. Everyone is aware that virtualization of the network means that business relationships and business models will have to change. We are still wrapping our minds around just how enormous that change will be, and how much disruption will be carried in its wake.

This is not the first time people have predicted an overturning of the business models in this industry. People predicted that technology changes such as network switching automation, mobile phone, voice-over-IP and the Internet would all change the communications business as we know it, but it hasn't really changed that much at all. Communications service providers have proven themselves to be rather good at buffering the impact of these technology changes, taking advantage of the cost-saving opportunities while not allowing the customers and revenues to leak away too quickly. Smart. And their suppliers still supply, pretty much in the same way they always used to. Most of us - consumers and businesses - still pay monthly communications bills to a company that is a descendent of the company that built our local networks many decades ago.

So, I'm not predicting the end of those companies. They know how to look after themselves. (Or at least some of them do.) But this time, network virtualization will inevitably transform the way we all do business and procurement models are going to change in a big way for carriers, their customers, partners and suppliers.

What challenges will they face, and who or what will be the driving forces? I'll get into it in my next blog. Follow us on Twitter to make sure you don't miss it.

More Stories By Esmeralda Swartz

Esmeralda Swartz is CMO of MetraTech, now part of Ericsson. She has spent 15 years as a marketing, product management, and business development technology executive bringing disruptive technologies and companies to market. Esmeralda is responsible for go-to-market strategy and execution, product marketing, product management, business development and partner programs. Prior to MetraTech, Esmeralda was co-founder, Vice President of Marketing and Business Development at Lightwolf Technologies, a big data management startup. She was previously co-founder and Senior Vice President of Marketing and Business Development of Soapstone Networks, a developer of OSS software, now part of Extreme Networks (Nasdaq:EXTR). At Avici Systems (Nasdaq:AVCI), Esmeralda was Vice President of Marketing for the networking pioneer from startup through its successful IPO. Early in her career, she was a Director at IDC, where she led the network consulting practice and worked with startup and leading software and hardware companies, and Wall Street clients on product and market strategies. Esmeralda holds a Bachelor of Science with a concentration in Marketing and International Business from Northeastern University.

You can view her other blogs at www.metratech.com/blog.

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